Is it Time to Adopt Internet of Things (IoT) in the Warehouse?

As in transportation and healthcare, there seems to be much excitement about the Internet of Things (IoT) in the warehouse too. But, what does IoT mean for the future of warehousing? Does it fit here as well?

For practical application of this technology, it is important to understand how it can be used in the warehouse to increase efficiency and visibility. This blog post explains the very basics of the Internet of Things, what it can do for the warehouse, and when it is the right time to invest in this upcoming warehouse technology.

What is IoT?

IoT, also known as the Internet of Things, is a network of interconnected physical objects accessible through a digital network (e.g. the Internet) that form an ecosystem of smart items that are capable of capturing and exchanging data (e.g. location, temperature, etc.) in real-time.

The connecting points could be a person with a sensor strapped on, a cargo with a temperature sensor, and/or a forklift with a motion sensor. All devices in this ecosystem can collect and share data in real-time to report on their state, environment, and usage.

According to DHL, by 2020, there will be more than 50 billion objects connected to the Internet

What are IoT Sensors?

Sensors are small devices capable of detecting physical variables like heat, movement, humidity, temperature, pressure, etc., and converting it into comprehensible/readable data. The simplest example of IoT is that of a motion sensor connected to a forklift or an RFID label attached to a package.

In the case of the forklift, the motion sensor can detect the speed in relation to its proximity to a bin, send the information to the computer, analyze it, and issue a command to the forklift to either slow down, alert the driver, and/or block the movement. In the case of an RFID label attached to a package, it can be used to track its location within the warehouse.

Because IoT sensors are interconnected, they have the capability to collect and exchange data, and pass it on to computers to analyze, streamline, and orchestrate warehouse operations in a way never done before.

How does IoT Work in the Warehouse?

While computers and radio frequency devices are not new in the warehouse, IoT is. IoT devices augmented by the evolution of artificial intelligence, have not only amplified the capability for collecting data, but also turned data into intelligent decisions and commands to perform specific actions.

Source: Internet of Things in Logistics by DHL & Cisco

Collecting data such as temperature, location of inventory, movement of warehouse clerks, etc., makes IoT an instrumental technology in the digitalization of the warehouse.

Here are a few benefits of sensors and IoT in the warehouse:

Inventory Optimization

Warehouses may consider using IoT for inventory management for the following reasons:

Sensors and IoT reduce manual dependency for slotting cargoes, especially if there are numerous SKUs, thus eliminating chances of mix-ups.

You can assign logic & priorities according to the stock and avoid delays in pick up.

It helps streamlining ordering patterns, so that safety stock can be maintained at all times.

Source: Wall Street Journal

Gaining Operational Efficiency

Gaining operational efficiency through IoT in the warehouse is possible in more ways than one:

The data provided by the different nodes in the IoT sensor network helps detect idle time and maximize resource utilization.

By shortening the turnaround time, it reduces the order-to-ship cycle time.

Attaining Visibility

Visibility throughout the warehouse is the soul of warehouse digitalization. The very concept is now turning the Internet of Things into the Internet of Everything by having not only things, but also locations and people connected. In fact, this revolutionary feature of IoT is changing the entire supply chain landscape.

Here is what it does:

It provides you real-time updates of processes, thus enabling you to make effective decisions in the shortest possible time.

With all that excitement about IoT, there are three questions that arise in the minds of decision makers looking to adopt cutting edge warehouse technologies.

Where does the technology stand at present?

Is it the right time to adopt it?

Is IoT in warehouse here to stay?

Here are the answers to these questions.

According to the 2018 MHI Annual Report, that surveyed 1,100 industry leaders closely connected to warehousing,

Planned adoption rates for IoT and sensors in the next 6 years are promising

Derived from 2018 MHI Annual Report

Where is IoT Now?

To determine the present standing of this technology, we need to assess it in relation to the Innovation S Curve, the Adoption Life Cycle and the Hype Cycle, three important frameworks that decision makers should consider when investing in warehouse technology.

The S Curve of Innovation Diffusion

IoT still making its way into the warehouse, and so, we believe that it remains on the Ferment Stage, but close to the Takeoff Stage, with players such as Hitachi, Huawei, GE, Bosch, etc., giving one another tough competition.

Its evolution is steadfast, and research & development are rapid. It won’t be long before it reaches the takeoff stage to go mainstream.

The Technology Adoption Life Cycle

According to 2018 MHI Annual Industry Report, almost half(45%)of respondents are already using sensors for supply chain operations. That makes it one of the most widely adopted innovative technologies in over past 5 years.

Evidently, these are the global early adopters of IoT that are starting to use sensors such as RFID, biometric, GPS devices, wearable sensors and actuators, etc., to improve and standardize the technology.

Consequently, we believe that IoT is in the Early Adopters stage of the Technology Adoption Life Cycle model.

The Hype Cycle

The 2017 Gartner Hype Cycle for Emerging Technologies suggests that IoT is on its way to reach the Peak of Inflated Expectations, meaning that the volume of innovation that leads to important technological improvement is at its highest. The cycle also suggests that it could take between 2 to 5 years for IoT to reach the plateau of productivity - the point where it may start to decline.

Interestingly, the growth of IoT has happened faster than what Gartner had suggested initially. The performance has, so far, met the promises that these technologies had extended, to begin with.

Derived from Gartner Hype Cycle of Emerging Technologies, 2017

IoT is one of those technologies with the potential to revolutionize and digitalize warehousing operations; to connect the disconnected points, make warehouses smarter, and provide a level of visibility never seen before in warehouses or distribution centers. If your organization is not ready to adopt or test it yet, we highly recommend that you start monitoring this technology and keep learning more about it.

As always, if there is anything else that you would like to know about this topic, or if you need some tips on warehouse technology, do not hesitate to comment.

Hector has 15 years of experience leading IT operations for large and small businesses. He holds an MBA in Management and Bachelor's degree in Information Technology. Hector has a passion for books and creating opportunities for others to grow.

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